FOA media releases 2014

Forest owners given another ETS whack

A measure hidden in the fine print of the Budget has forest owners wondering why they are again being unfairly singled out.

In a Bill that is expected to become law today, forest owners planning to pay their emissions obligations with international units will no longer be able to do so. These units, which typically sell for about a tenth of the price of NZ units, will still be legal tender for power companies and other emitters.

"Forest owners who have bought international units to meet their obligations during the next 12 months will be forced to sell them at a likely loss," says Forest Owners Association president Paul Nicholls.

"The number of forest owners directly affected is unknown but all forest growers will be concerned by the inequity of this. For the second time in the tawdry history of the ETS, forest owners are being hit by retrospective legislation."

Mr Nicholls says the Bill is designed to stop arbitraging by forest owners – a form of trading which enables participants in the ETS to profit by selling high value NZ units while meeting their obligations using cheaper international units.

"But it also captures everyday forest owners who entered the ETS in good faith and who now want to exit because it isn't worth the candle. Small forest owners and iwi will be disproportionately affected.

"Meanwhile power companies and other emitters will be allowed to arbitrage for another year."

FOA chief executive David Rhodes says arbitraging does not benefit New Zealand or the climate in any way, but it is an inevitable result of allowing unrestricted volumes of cheap international units into the country.

"We, along with Maori interests, the Parliamentary Commissioner for the Environment, environmental groups have repeatedly told the government that these units undermine New Zealand's ability to address climate change.

"Finally they've decided to act. But why now? Why with such urgency? Why retrospectively? And why only forestry?"

He says there is a deep irony that the only industry that has consistently criticised the use of international units in the ETS has been singled out in this way.

"Minister Groser announced last December that non-New Zealand units would not be able to be used in the ETS from mid-2015. This provided ample time for players to adjust ... except for post-1989 forest owners, for whom mid-2015 has now suddenly become yesterday," says Mr Rhodes.

"For forest owners this continues a series of decisions by this government which are as baffling as they are inequitable. The forest sector had considerable potential to help New Zealand meet its 2020 emissions targets, but that potential has largely been squandered.

"Far from being a part of the solution, forestry is going to become part of the problem because lots of trees planted in the 1990s are approaching the harvest age of 30 years and new planting to offset those harvest emissions has been stalled for several years."